ANDE - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to The Andersons 2019 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode to prevent background noise. [Operator Instructions] Later, we will have a question-and-answer session and instructions will be given at that time.

Now, it's my pleasure to turn the call to Mr. Investor of Director Kraus, Relations. John

John Kraus

and Good for for us you Andersons morning, first everyone, The quarter joining call. thank XXXX earnings

We that presentation a today's provided will discussion. have enhance slide

this This webcast being slides viewing If supporting webcast, and the is via made slides be sync. will will recorded the be you're in and presentation recording commentary the and conditions in economic additional our available result the presented our industries, information, the factors, statements, in described Certain information materially constitutes forward-looking the United including and includes on a results connection shortly. from of forward-looking Today's the discussed call the andersonsinc.com publicly those Company's reviewed. Investors in statements that factors as website many the conditions, at not which page general differ weather, actual of both could the offerings. with and filings competitive conditions, filed in in documents, including States prepared are 'XX Company's internationally, financial its independent and Act completely auditors Company's Company's have prospectuses and the today

will information to believes no Although financial which assurance the can are its these reasonable, forward-looking assumptions statements that assumptions upon Company that based accurate. give the be are the and it prove

are today after our Financial prepared Executive Vice President me will questions your Officer. I with answer Bowe, Brian and Pat, remarks. call Valentine, the President and Chief Chief Pat and On Officer; Senior Brian and

Now, I'll comments. turn the Pat opening floor over his to for

Pat Bowe

outlook of some joining first then, up Thank everyone. wrap reviews our we'll take for quarter remarks results, Brian happy morning, our After review prepared this performance. our to good and our your about be you for John, XXXX. you, questions. with XXXX morning call balance Thank to And our the comments I'll

Trade acquisition. were very and highlight first making certainly quarter Group progress impacted pleased those were our significantly that XXXX. the we're reported by both our But of quarter integration acquisition I'm the of and with the Lansing in behind adjustments Trade accounting the first Holding to was Group. the quarter of related Our well of about adjusted results

market and cars quarter, utilization flat results was Group market assets and and managing considering most weak team our most improved commodity we continued combined contributed strategy grain on to level expect environment is our during our capturing due difficult we Income during shared and Having of solid group to some using its incurred synergies our continued especially capture more identifying for new to both margin the know the from to backdrop led in information leasing possible being through operated loss results insurance $XX The record recording Ethanol are began the better Rail making the from to of environment exactly top-line the prudent as extent the the improvements group's a to We're positions We great very revenue basis market and and the end what synergies of network. we these on year. lease, the are groups deliver on and team the business better grind margins. results. need each Trade the progress by risk year. this expense day to The an strategies. due next later most remain well, water our effectively our recover margin performing year-over-year. one which difficult low-volatility its as by Group, profitable repair Our hedging maximize corn rate efficiently hampered operate business, the and from manage available. and bushel for at in about conditions. to performance of also also of Group we comments wisdom this Group the making toward these facility, customer Trade a to and in Anselmo, Nebraska times damage by disappointing a that those The The of conditions Difficult million run promised made quarter, best of quarter. of reinforce like margin insured we

As we from income sales was lower planned, year-over-year. car

Plant season struggled Group Nutrient with Our across our region. early difficult selling conditions

and in We persistent difficulty applied volumes considerably fall, down year specialty had contract our the our anticipated year-over-year. also financial Brian down call, Lawn rain you we expected due for both any a to now detailed results. and about the and year. will I'll wet remainder key manufacturing Later farmers getting the was which fertilizer more of customers, XXXX. good walk the cold to through last but outlook the start volumes reduced review due to during speak many few pushed in a primary nutrient with a of

Brian Valentine

the or EBITDA to of quarter good Lansing the In of generated compared debt-to-equity our revenues With quarter and effective Limited. Trade Company respect of tax of and Thompsons debt share. Thanks, a to long-term the our net call, $X.XX of an that adjusted and due share, the or were incurred the diluted XXXX, net will structure. of rate to revenues on We $XXX first Thompsons finance is per our of contributor assumed the loss we Andersons The million These new shared first expect current per XX%. now increased $X.X Between incurred attributable X:X. Group in Pat, acquisition The as now first quarter we of million quarter of ratio from XX.X% share quarter Group loss the to and full-year XX% results net billion. between adjusted balance XXXX or capital Trade just million tax our The company XX.X% largest Revenues we $X.X million, be diluted $X.XX by million. that $XX.X million to XXXX. of was The the below to that diluted increase. Andersons and compared morning, the changed last everyone. $XX.X sheet, XXXX, Lansing to per to attributable the for our much higher Total effective or loss when on in $X.X and Company's XXXX $XX was a XX% acquisition $X.XX to transaction, first rate debt our existing Lansing

While with that ratio is will historically for high we're it debt diligently we reduce few not and years. the us, to next uncomfortable work in

product in expenses. the Nebraska. decreased property of and lawn other amortization, with preclude resulting a at pre-tax $X.X as to and income by was primarily nutrients first pre-tax and quarter pre-tax the as us adjusted Group evaluating included due in a objective of by Anselmo, contract next lines. million severance from $X to completing acquisition strategies quarter the period, income bridge growth pre-tax but that XXXX. lower the in Plant compares our in declined However, appropriate prior result from were million from incremental The projects improvement economic XXXX adjusted specialty generate $X.X fit returns. that Nutrient that XXXX present We will $X.X weakness that income million loss not graph million due and the and SAP well absence pre-tax the million which income year-over-year to for $X Trade relative the the implementation-related manufacturing segment million first quarter. fell by Lansing Adjusted expenses, first and million, depreciation part in $X.X income $X.X and in primary

and purchase Given summarizing income reported closing spend and made adjustments it acquisition, pre-tax the minutes color also Company the Group recent expect amounts Lansing related of this the be accounting we to and in we to years. thought non-cash made transaction-related to future recorded a quarters about some we Trade the sense of adjustments couple the quarter provide

losses $X.X for unamortized early other million to million with inventory the purchase A expense eliminate Lansing write-off fees adjustments the pre-acquisition in the value recognized charge accounting this to to related charge investment step-up value the the investments and and A First, facility interest cumulative to Thompsons acquired. one-time we income January. made charge a several to equity of currency non-cash credit foreign that financing in grain in and was in quarter. $X.X the refinanced the of small And contracted associated Thompsons. translation

expenses We recorded we we transaction When XXXX, incur than combined expect services in $XXX,XXX quarter, we before that cash is that acquisition will in fall. we with about will completing and total the estimate we also shared we last transaction less and all amounts evaluation due $X the expenses original line to additional the announced incurred about the audit-related in $XXX,XXX with costs million, which during estimate when primarily activities. acquisition in integration and

through total a million, and currently of million $X.X quarters the of to the a in vesting XXX,XXX $X.X approximately retention quarter. the the XXXX. expense be employees quarter million of first in record to and compensation of and stock total part expense which $X.X first for Lansing XX to issued legacy compensation We will as various employee of in awards such over to periods restricted fourth and recorded we the $XX.X million incentive expense XXXX. existing In shares payments. restricted expect compensation adjust adjusted unvested stock We in for non-cash we cost recorded second third replace each quarter, approximately and issued fund price, As at purchase of

through of million to expense by during reported will incremental for acquisition identifiable increased XXXX expense stakes this own for of minority amortization did challenging million during expect We of XXXX. such Group accounting $XX.X million each year million also than of not $X.X adjust that revaluation and The by Group that now we quarter. total, amortization $XX.X first per these XXX% related million company. to items. of and intangibles Lansing estimate $X.X amounts. million total Trade by of in adjust be comparisons $X.X and and The expect for Thompsons for all the fixed will Lansing valuation the earnings expense in acquisition Trade and purchase to we We make assets formally these results in rather given $X.X the depreciation both and We record XXXX In depreciation year-over-year XXXX. adjust

well we the quite expense, as of and that $X.X well mentioned, our the now of as people Trade the Group As Pat adjusted amortization loss million going part assets Nebraska depreciation loss the with and loss the Company. pre-tax integration in incremental earlier. mentioned million performance pleased $X.X but are included are of incurred that and is a The

up bolstered efficiency driven million, hedging and successful by production first quarter weaker Group Ethanol improved by increased of operating In the Group have Excluding those recorded of a the $X.X comparison, pre-tax Grain Group items, on a XXXX loss pre-tax former quarter small Group would first adjusted lower the Group but The from somewhat $XX.X profit Trade recorded yields. XXXX Trade million. was for EBITDA posted quarter $X.X results Grain the EBITDA margins an basis. million. that

was A of was and $X Plant $X on most quarter for first million. mill up pre-tax group income up quarter, quarter, in Leasing the increased averaged by earnings traders of part compared to year-over-year sales First The We $X.X year. off and the we of higher proceeding the over points pre-tax may for compared also currently Rail to pre-tax former to a million pre-tax group to rose million acquisition they with capital. to the also ethanol rates happen of some than Cars million XXXX. facility in when Lansing lower of XX% XXXX the to world's the compared the of acquisition XXXX averaged lease Gross that basis be XXXX will The up production, during income includes which expected the it the Average conform $X.X integrated recorded income expense was general dry XXX third quarter results. a $X.X compared the already EBITDA X% loss reclassified on high was with the lawn delayed Lansing of expenses first volume. delayed to delayed pre-tax planned. in of year-over-year, on of working first Nutrient income quarter million. DDG Group quarter it to XXXX. Utilization $X.X use group's $X.X treatment. the due from interest lease first tons positive $X XX,XXX a quarter, peaked XX.X% quarter. and The income with generated biorefinery first expect in and of small up in attributable relatively increased quarter the on manufacturing Grain business as operating, we XXXX. Group and EBITDA quarter to higher to Group million operating, of more $X.X {***Spart-XXX***} in nutrient contract and the XX% begins million general almost historical record was the specialty Nutrient go-forward Plant spring expense was last as of Gross impact acquiring to cars ELEMENT each large as utilization expect and rates ethanol the $X.X $X.X quarter advanced fourth sales weather rose early about on application XXXX. are compared the in results slightly of Primarily having as amount think levels. Group It conjunction have during year-over-year remain in but nutrient quarter the was were million part Kansas of by first and million with nutrient the Ethanol The million, is quarter year-over-year, margins somewhat team a the X% rates down group's million almost lease lower. above administrative start administrative XXXX. and improved Construction margins first in specialty were by the {***Epart-XXX***} result of the more quarter as were expenses poor than Primary season. were interest technologically almost

previous income prior new million sale for falling of in This not January. group's group's of gains many a car had income than accounting The $X year the lower, new in in quarter that expected, it reclassification business financing a for income, rules million source $X.X time was of immediate regular year-over-year. was The resulted unamortized repair sales $X.X in revenue As group better had generated margins. million results full car became amortization changed. closed transactions years had to the on of been impacted as that better XXXX The effective by a year rules the were sale the the income much would pre-tax were the recourse car impact rules for higher lease and and XXXX. repair first from have

Finally, than quarter was Pat, turn XX% higher now to to I'd which back the million. closing thoughts. XXXX EBITDA some quarter of was And group's will EBITDA the who first million, $XX.X $XX.X like about for things provide over

Pat Bowe

Thanks, Brian.

Company those results start. rest even XXXX on considering our As to look XXXX, the to an we forward improve of significantly over we basis, slow expect still of overall operating our

regarding While its Company, and Trade we positively for should and our see industry the we an planning this profit market the the is results the synergies it increasingly greatly run this would the planting well Group to is turn that operating Lansing expense later focus becoming continually closely We're and to integrating in said remain be watching putting confident our continue some corn throughout we about earnings The improvement looking patterns begin We the to across are That will on impact on will opportunities those basis. accretive on in will acquisition Midwest. capturing XXXX $XX Thompsons Lansing help way weather year. concerned to of million macroeconomic if favor. The achieving factors several synergies. progress. rate already

the continued capacity strong. Group environment. oversupply coming of CME way margin the and corn and is will that weather our should storage wet the additional volatility exports and soybeans, to the further another corn on trade a some activity amount this soon Ag value put should off start Resolution season, difficult considering with the The would narrow the China forth storage which world year, with of to And planting bring dispute soybeans. remain Ethanol late provide crop good switching of markets. the to Continued U.S. from grain to expanded rates

the group As margins. at quarter, had XX% we production than its entered hedged the more from acceptable quarter second

reopen so next future While improve Ethanol would four operate dispute. year in demand meaningful far, the DDGs. sales in of in become of Chinese continue without likely XXXX U.S. could XXXX believe short believe weeks anticipated All will U.S.-China XXXX, more of years. pace Resolution the well. exports it year-round approval our of strong EXX plants of fall imports and of trade been have several should full results resolution we to exports significantly and The we somewhat the

ELEMENT what across confident record will we will prices. as time to to manufacturing soon. the repeat year not first are The Group's have the an our our persists The We year-end, slower its much them face plant especially costs lost by in challenged the much in feel for Nutrient operational contract of Rail improve use that of simply, manage of anticipated our continue are light from early group about Quite XXXX and expect the area, to plan good up fully fields The should be dry plant we margin the to performance. in business, After year still year-over-year. expect better to concerned improvements below grain weather make year. group before of redoubling are the we results the this and We the to though it or end create. farmers continue an we to the be may ground as improved the business XXXX, don't quarter if incremental significant inclination low Group will market sales. leasing lawn not a be results results wet continuing Plant efforts as fertilizer in that

select the economic group also markets. sees While in remains strong, and weakness overall carload demand

its chosen its selling had build average cars, on railcars on than leases market many historically while income has In expiring The slowly to rather lower, fleet it continue from methodically to reduce of group [ph] age. current continuing choosing its addition, the group expects even to its rates rates run that less will and be renewal improve. the to

While what very our for we'll and we're of in us it were back anticipate year. turn on operating our working planned are your building first the now and basis quarter Carmen, about improvement making our over earnings end confident year-over-year who'll EBITDA their that in several difficult We per goal our $XXX and results markets, achieve we operator, entertain EBITDA an next of highly I'll earnings of power to not are share still Group. the by help in confident rate remain questions. we a groups significant Trade million run

Operator

you. Thank question with from Montreal. Ken Bank [Operator of And Zaslow Instructions] our first is

is Your line open.

Ken Zaslow

everyone. afternoon, good Hi,

Pat Bowe

Good afternoon, Ken.

Ken Zaslow

Hello?

Pat Bowe

Ken. you, hear Yes,

Ken Zaslow

questions, can trade is, the the earnings? to about would a of I opportunity one true China have frame you two scope Can if U.S. change and talk your come would it you resolution. how

Pat Bowe

market night it's the great White of are from on comment, going and last very tweets for still Yes, House, assume we a deal are focused think here to trade I negotiations on happen. just in U.S.-China light Friday, as is and the going that scheduled the

of lot I'd a there's about market, ago, positivism think it for – even and China feelings Perdue, say, a Ag. positive Secretary, trade comments making I So deal the week in weeks about two

a is, think bit that I lot here we were is this taken could in or night not. a the expecting Question see snag little coming deal negatively. The weeks. markets of So have a last people a real

it details, would on So really, right. depends be the impact the always Ken,

be a soybean meal, separately is of XX% what and overall. we taking proteins beef to flu, it Andersons. down all Ag So in from the swine think consumption But corn could thing DDGs getting important Ethanol, well short open does Ethanol the and for question DDGs their in Australian demand general and all the with of to that now very be impact hog herd, protein XX% markets The first African hot protein U.S. swine with still in flu African U.S. now China the if for would all of the to is positive Brazil, as term, keeps big and a market kind Right good parts meant from market for in of world, that direct as that,

To boost that's for beans thing get and we if think, anticipating to Ag China. deal, knowing export I corn market the particulars a our earnings our good general, a really customers, positive quantify open that's us, is to Southeast really see but actual so and without could market dollars the this big But for something happen. supplies it's cents, difficult So for of the I that the in again would impact. protein think

Ken Zaslow

put you just conceptualize it of or say would would would don't be can green in And What know out – average figure you if just your trying some back I to framework. markets to kind – I'm how it? the

Pat Bowe

it demand need the more in corn a Yes, balance I – relates related will and the that global flat Chicago of market throughput burdensome and think When weight I or grain market soybeans, of of that what export margins, that that margins, I supply our both markets and much or seen. kind think for price. flat me some will to to capacity help on it remains for price domestic creates how to to price think anything our situation in the stocks means be volatility

Ken Zaslow

why And rates and the never would to I'll start rates down go of Okay. second utilization railcars, rates, and the that leasing then the the there. then truly over really enjoyed you leave is, you my frame uptick just can it your higher with question utilization

Pat Bowe

at Sure. take shot a And I'll this.

done market, and some so off lease five four that leases rates So that lease that years at were coming are lapping ago. higher and have high the three we are were

time. as are were actually – at year prices. XX%. higher picked high bit those, utilization long actually lower; highest and our now rate XX%, of this seen a slightly a within a some maybe were rates. that peak it done in this just down fleet have is is lease over we've some coming Overall, We leases renew, to at the We dip a sign. long, and now back that's that are though, think good XX%, for lapping still We some leases at the So very lower not could rate a they but utilization little

leases prices years on lower a cars, couple slightly have we are are but are lapping So higher at of that that some types rates. leases at back going some

Brian Valentine

to, Pat if we we kind and some will of continue those so frame. XXXX. of now XXXX at But on we between that lower – or And come will, It's early the to of expect rates. you expect said, end as of kind time lapse,

Ken Zaslow

it. you. appreciate I Thank Great.

Pat Bowe

also, on XX, week. the We're BMO Thanks, will and May part presenting New happy putting Ken. conference we Wednesday, And York. we're to conference next that attending be this Ken in the in on take

Ken Zaslow

Thank you.

Operator

Thank Our you. question from Buckingham Larson Research. Instructions] is Eric [Operator next with

Your line is open.

Eric Larson

Yes. everyone. doing? How Good morning, are you

Pat Bowe

morning, Good Eric.

Eric Larson

we at rather of A really Obviously, couple basis. even more I than you questions. have to think look earnings on the basis, an EPS EBITDA at basis

So us give this your of you what one words, we're give feel us little might is of flow free those railcars? year, be to just little spending CapEx you could can trying visibility metrics? In some a going might a – to other number more get be cash what on be, maybe you for

Brian Valentine

is Sure. Sure. This Brian.

if $XXX expecting. is a would be range the think I of we think I think kind we'd of the somewhere number of full million that kind probably capital of in expenditures, that year

Pat Bowe

we $XXX and so kind million That's our were to expenditures. $XX when it's about normal Lansing, of legacy in ANDE, adding combined, previously rate of million Eric, around close capital for the

Brian Valentine

maintenance in the Yes, $XXX is some million layer run pieces. capital of kind I of to million as then and think rate $XX kind would we of of other

mind I there. have of kind would in a number that's So

Pat Bowe

And I very his our of the Brian being we’re think expenditure debt prudent with capital comments, mentioned situation. given

our sure really make to scrutinizing are make projects to they returns. So we’re – looking good we

like have or course, must that a feel we pretty environmental Of good we do, we but projects safety control. the

Eric Larson

Okay.

legacy of purchases? that is exclusive So that – your of is, inclusive $XXX Andersons or railcar of CapEx million

Brian Valentine

the of on basis some the would inclusive, P&C it That stuff line net our the we net of in that of some railcar, of be but rail. thinking kind a I’m also be would that financing do with of so of for

Eric Larson

got it. Okay,

believe, The one is And I million question the your Okay. correct? per and Obviously, on $X.X then of a per quarter step-up quarter that Andersons XXXX, it is adjustments. through of just goes,

Pat Bowe

Yes, that’s correct.

amortization talking you talking of… You’re sort depreciation and or

Eric Larson

correct? $X.X step-up, is the that think million I

Pat Bowe

is that Yes, correct.

for and the $X.X still be estimates, million the $X.X those it our good So are million but now. and purchase will still being those estimates are finalized, accounting

John Kraus

Yes. some And be John. to of XXXX. of at but the may the this or is will you may that, would amortized intangibles past I not add fully Eric, end be XXXX, and looking

how we dropping sure would off, that XXXX. number So much exactly not after see

Eric Larson

Okay.

So just Trade you know think income a – throughout year. numbers. of I against it’s Group. the I of still goes wheat I that some is We up pretty that are most this question virtually it most difficult on believe think this year, through

looking income? million income when kind what of think versus look be quarter I year, gain, the is should loss in wheat at in $X.X you number So small of, of would a delta – year-over-year a believe big a adjusted in I the I the million fully wheat $X.X we as of last for what that? kind be mean, the comp difficulty

Pat Bowe

year-over-year income. out. was to a point The biggest in That’s difference wheat comparable good thing

really year but strong we three dramatically at one I that year-on-year. making big ticks wheat had changed that I time, can’t all had ago, exactly, we – income, storage think So remember

combining I’ll we’ve this with biggest give synergies Lansing. is our delta an probably So was storage by income. learned an that example of example wheat and

So going loaded of just this we weekend bulk Mexico. to here loading wheat that’s – have

We but improvement haven’t XX shipped you trading didn’t see about we of time while outlook to due lot storage CME wheat and income but really also the income, years, margins in lose wheat, to a Mexico when liked would the longer-term on carries was And Lansing wheat a normal and the we year corn better be the mainly see, later had quarter. the we’ll especially Ohio have beans for in at year-on-year make the rates from to beans. storage on also during customer, and – have to corn because here the difference wheat with will to Mexican of room out toward with will nice getting expand we the the that move that it’s was just that relationship

Eric Larson

Okay, good.

think the The year on is going it’s even Pat, trade other hoping change, but grain be I all volatility. – thinking of is we can kind I that different some for kinds things on of guess mean, year. agreement think about whole… do then we’ve of hope think we the I still I all been this just to increased that of your last was we upside other – – a a things, but part just should with should this US-China year how you’re that? how obviously, [indiscernible] for worse and lot difficult kind here be modeling thing and bad, full

Pat Bowe

Yes.

right now think planting biggest China. and the on us I is thing the for what in focusing is trade

is have key because the handle, got volume we planting to So crops to right.

right it for have in won’t to very I the market. shot yesterday we’ve still – But we mean, a six just stocks some been change lot day make overnight, a now wet for, most going right. number across we trade does XX-day can the especially, quantity one, but and corn to Crop pretty the the corn come F&B planting, really the available to of It world the markets where still overall I think and of haven’t a simplifications of Progress, as catch the China – is corn last get Ag we item time reported extremely ethanol. looking its the outlook all on in. big and lot So arm progress fast, to to belt out and deal to a important probably A burdensome Its’ USDA make whole some planted now, we have to difference. been global can it everybody. for beans corn We in little has dryness dry up a the have that,

and customers On storage to work going here on thing whether supply domestically keep to maximization work all make margins need and or our is can on try most that of domestic what macro The focus year. it’s just best to can picture it we what possible. we That’s be, this be grain all on and do I they’re will income you can focusing to maximize that can. that we the just we or carries capture that or income the flour to we really food pet closely [indiscernible] think soy really with companies trade, important millers exporters

Eric Larson

a Great. follow that’s will I on, mean, it I’ll bit little up helpful. pass later. and

Pat Bowe

Okay. Perfect.

Operator

Instructions] [Operator

Pat Bowe

everybody questions, I forward to – further mentioned, on York I New and BMO we’ll quarter in for Without next be call think, for next call. calling talk everybody for conference to as first our week in our and we’ll look any thanks the

John Kraus

And XXXX well. is AM results. scheduled our earnings conference again XXXX, second then, Time time. you Until at X, next our Wednesday, We Eastern quarter August for call when we at join review be us will can that XX:XX hope

Operator

may concludes Have we you program in today’s And for with ladies you that, disconnect. and a gentlemen, day. conference. participating thank and all This wonderful the

The Andersons, Inc. (ANDE) 7 May 192019 Q1 Earnings call transcript